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Erste CEE Macro Comments

PL central bank: NBP MPC member Glapinski said that he sees one, or at most two, rate hikes in the second half of 2011. He also said that there is no need to tighten immediately and sharply.

Given that Glapinski has been one of the most talkative members, with clearly hawkish inclinations, his comments suggest that two additional hikes might be as much as we can expect for this year (which is our baseline scenario). Glapinski expects CPI to hit 3.5% in the first half of the year and then to fall gradually. Glapinski thinks that the zloty has some room to appreciate further, which is also our opinion.

HU bonds: Yesterday, the Government agency sold HUF 50bn (EUR 183mn) in 3Y, 5Y and 10Y bonds. Yields increased 6-26bp vs. the auctions two weeks go. Demand was not slim, however, as total bids were at HUF 130.8bn. After the very good performance in the previous few weeks, profit taking seemed to have set in. However, recent news about the fiscal package, which indicates that revenue increases may play a greater role than previously thought, migth have contributed to the higher yields. There is no news on any possible reduction in the size of the fiscal package, which we see as sufficient to contain the deficit after 2013. We expect a slight decrease of 10Y yields from current levels in the course of this year.

SR monetary policy: NBS left 2W REPO rate unchanged at 12%, thus matching both ours and market expectations, deciding to take some relief after cumulative 400bp hiking cycle. Wording on decision has been scarce, while more details on the monetary policy outlook will be available next week when NBS would present new Inflation report. We see stabilizing FX outlook to reduce the risks of more aggressive NBS stance, thus continuing to anticipate up to 100bp hike in 1H11 amid inflation outlook.

Traders' comments:

HUF: Yesterday the Government debt agency sold several maturities at market levels. Longer maturities were stable after the auction but mid term papers were still better offered. Likely upside potential for another 20-30bp.

PLN: Curve steepened after Glapinski stated 'no needs for sudden, drastic tightening'. Long end papers still well offered.

RON: Yesterday, quiet market ; some interest on buying short term T bills and 3Y bonds. The attention is focused on Monday, when official CPI figure for January will be released.

CEE CDS: We opened the day wider in CEE CDS yesterday but erased some of the early gains after better than expected US job numbers.

Sursa: http://www.rciro.ro

Tags: after glapinski comments